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Sam
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Category: Tax
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My son has lived and worked in the US 10 years.

Resolved Question:

My son has lived and worked in the US for almost 10 years. He did some consultation work for which payment was remitted here. HMRC advised he complete SA's despite him having non-resident status. Now completed OVDP in US and been taxed there on monies remitted here. Now HMRC won't repay tax paid in relation to years prior to 2010/11 saying he's out of time, despite the overpayment being due to their bad advice. Any way we can appeal this please?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

Can you advise what OVDP stands for?

I asume that you are stating that son lives in USA but continues to be paid for work from the UK - for which he does not come to the UK to earn.

He has been paid gross (without any deeduction of tax) and has been completing self assessment tax returns for HMRC - on which he has declared this income, and paid tax on it to HMRC - which leads me to assume he doid not complete the non residency page and/or did not claim his UK personal tax allowances?

Then the USA have also charged him the tax

You ish to rectify the tax suffered in the UK HMRC state he out of time - and refuse

Have I got that right?

Thanks

Sam

Customer: replied 2 years ago.

OVDP stands for Offshore Voluntary Disclosure Program a program which happens during an application for US citizenship

My son is living and working in the US, as I said. He was paid for consultation services apart from his normal work in the US. This was remitted here. We called the HMRC and they told us he should complete self assessment. He paid tax on it, though on further questioning to HMRC he also filled out non-residency forms. He only has allowances here due to Origin, which he did claim (he was born here and lived here until 2005). He was unaware that the US would have claims on tax.

On completion of the OVDP the US have claimed tax on the money remitted here.

We wish to reclaim the tax prior to 2010.2011 - have had refund of tax paid from then. But HMRC say we are out of time!. We claim tax should not have been paid at all due to non residency rules, and we were misled by their so called expert technicians.

Expert:  Sam replied 2 years ago.

Hi

Thanks for your response - there are two ways to approach this situation

The first - th declared incxomemadxe to the USA also needs the tax suffered position to be declared so

1) he does not incur any further charge on this money (as its been subjected to UK tax) and

2) They will refund him any overpaid USA tax - for any adjustments that need to be made as a result of this.

Thats the beauty of double taxation, and we and the USA have a tax treaty thats covers this exact situation!

(But whether they have time limits, you will need to check with the IRS - as wea re UK tax experts and not USA experts)

The other option is to make an appeal on one of two basis

The first is called overpayment releif - which can be asked for when we are within the 4 years time limit - which we are not as 2010/2011 becomes invalid 05/04/2015 - so the earfluer year - that you wish to claim on are out of date. so the other which is known as Special releif.

A stautory special relief applies in cases where it would be unconscionable for HMRC to seek to recover an amount of tax or refuse repayment (if already paid). This relief only applies in a set of defined circumstances, summarised as:

  • Tax is due because HMRC has made a determination of tax due for a tax year or years, in the event that an individual has not filed self assessment tax return in response to notice requiring a tax return.
  • The individual is time barred from claiming relief, as more than four years have elapsed

But the following conditions must be met

Provided that three conditions are met:

Condition A: in the opinion of the Commissioners it would be unconscionable for the Commissioners to seek to recover the amount (or to withhold repayment of it if has already been repaid).

Condition B: that the person's affairs (as respects matters concerning the Commissioners) are otherwise up to date or arrangements have been put in place, to the satisfaction of the Commissioners, to bring them up to date so far as possible.

Condition C: either:

(a) the person has not relied on this paragraph on a previous occasion (whether in respect of the same or a different determination or tax), or

(b) the person has done so, but in the exceptional circumstances of the case should be allowed to do so again on the present occasion

then HMRC may give relief if it would be inconscionable not to.

I think you have a chance of having this heard by HMRC on the basis that they gave the wrong advise but usually appeals on this basis do go to tribunal - which will see your son needing to come to the UK and possibly incur furtehr expense to engage someone to represent him (if he feels he would need an expert to argue his case for him)

But at least then he has a choice - so thats the basis on which I would recommend an appeal.

Let me know if I can be of any further assistance with this matter

Thanks

Sam

Customer: replied 2 years ago.

It's highly unlikely the US IRS will refund the overpaid tax there. :( Can you tell me how we go about applying to HMRC for the statutory special relief and to whom, please. Where on HMRC.gov.uk would I find reference to this Relief?

Is it possible to come back here and ask further on this matter later, or only this session is allowed before Just Answer wants more money?

Expert:  Sam replied 2 years ago.

Hi

Thanks for your response

The USA will not repay the UK tax - but as they would have not allowed credit for the UK tax but considered the income, then the USA tax position wll need adjusting and its on that basis a refund will arise.

The Special relief - you apply in writing to HMRC by appealing against the refusal for any amendments to be made against the years prior to 2010/2011 on the basis that they have advsied you these are not undate tax years (so do not fall within the remit of overpayment releif) but that you wish them to consider special relief as

1) The tax was paid due to the incomplete advsie they offereed

2) Had the residency pages been completed along with each relevent tax refund, your son would have been deemed to be non resident and not liable to tax on this income due to the non residency

3) He has declared this income to USA IRS

The section in the HMRC manual that deals with special releif has been blacked out (I am ex HMRC and used these manuals often and much has been blacked out - as its very very useful! And allows me to provide a more knowledgeable service to my clients now I have my own accountancy firm! ) But if you type into google "HMRC special relief" you find oodles of references to it, by very reputable accountants! Which will form additional support to word your argument,

If then HMRC refuse this appeal then you must write back and state that you wish the appeal to be heard by the first tier tribunal - and then its heard ny a panel (or sometimes one/two) individuasl from reputable backgrounds (not always law backgrounds) whi use reason and judgement to make their decsion. They are very fair and to date I have found them very favourable in the cases I have had heard for clients.

I have managed to have all three of the special relief appeal cases upheld (only one went to tribunal which I won)

Let me know if I can be of any further support, I shall keep digging to see if I can find more references from HMRC manuals re this relief - but I dont hold out too much hope -

If you wish to ask anything more now, feel free to do so (and I have no issue if this comes in the form of being over the next day or two as you can access this Q & A thread through "My Questions" when you log in) but any additional work asked for, will, I am sorry to say require either a new question listed OR I can send an additional services request - both I am sorry to say will cost in addition to the amount you have paid so far.

But if you would be willing to rate the level of service I have provided for the work I have undertaken, that would be wonderful

Thanks

Sam

I am afraid that this is one off position with this matter - as Just Answer work on the bsis that one session and one topic per question listed, or we would be bound for an idefiniate period of time for each post, for which I am sure you appreciate is not a client relationship (when you provide ongoing support)

Customer: replied 2 years ago.

To whom in HMRC do I write to appeal, Sam? "on the basis that they have advsied you these are not undate tax years"????? What does that mean? Are there special forms to complete, or do we just write?

Why are these manual pages blacked out? Don't they want us "customers" to find out about appeal procedures? Are they up-to-date?

I'd be very grateful for any further information you are able to dig up please. You have my email address, don't you?

It makes me angry that HMRC seem able to pursue taxpayers, but are unwilling to give back tax taken when not due!

Expert:  Sam replied 2 years ago.

Hi

You just write and to the address from which you ahve already been

itten from (refusing your request for the overpaid tax to be refunded for 2009/2010 and earlier)

Sorry that should have read "on the basis that they have advsied you these are not indate tax years" This means that any amendments to self assessment more than 4 years old (so prior to 2010/2011) they will not amend as its to late

This legisaltion only came into play in 2010 and I could not possible comment why the pages are blocked out but I have (after a while) found this reference

http://www.hmrc.gov.uk/manuals/sacmanual/sacm12220.htm

Although this relates to determinations (this is when self assessment tax retruns have not been sent in and HMRC have estimated the tax they think is due) he prinicple remins the same in so far as

- Your son did not KNOW (based on the advise given) they he needed to complete a non residency page to render the income that ariose in the UK as NOT liable to UK tax.

Thanks

Sam

SO yes all my advise is the very latest up to date information - or it would be a waste of mine and your time if I gave you outdated information.

Please note only certain cases might meet the special releif remit - its not for all cases, but I do undertand your feelings regarding this.

Customer: replied 2 years ago.

Ah, so that will be the tax office handling his SA.

The stupid thing is that they did request non-residency forms to be completed, because of him living in the US, and him giving me authority to handle his affairs from here. They also have his US address! But they still said that a SA had to be completed because the money was remitted here! So much for their specialised "technicians!

I was aware that they had changed the rules in 2010 - bloody unfair I think!

I will check out the link you have given me. I have been on HMRC SACM12240 and 12230 and addresses are blanked because of exemptions to FIA!!!! They really do not want people to reclaim tax paid erroneously, do they? Grrrrrr

Expert:  Sam replied 2 years ago.

Hi

Yes it will be -

They are right - each year a self assessment would have to have been completed as the money arose in the UK - (it wasnt remitted here- thats when money is earned abroad and then brought into the UK - OR the other way around - just so know you understand the HMRC terminology) and this also applies when property is held onto in the Uk which generates rental income and pensions are paid from the UK - so bascially any income that originates in the UK!

But along with the declaration of this UK income, he should also have completed the residency page (which allows him to state his movements in and out of the UK and claim personal allowances as a UK citizen)

This then would allow HMRC to see - ys the money was earned and paid FROM the UK but as your son was NOT resident (lived and worked abroad and spent less than 90 days a year visiting the UK and NONE for work purposes) then he could have this income remian as FREE from UK tax, on the understanding that he declared it to the USA (IRS)

Although the time limited for amending tax returns to just the previous 4 years changed in 2010 - thats also when the special relief was introduced so no one person was treated unfairly - and it would seem there are grounds (based on what you have advised) with your sons case to argue this successfully

Thanks

Sam

Customer: replied 2 years ago.

Many thanks for your help Sam. Hopefully we will be able to reverse their decision not to repay the tax. If they still refuse, do they have to allow us to contact the tribunal you mentioned earlier, giving us contact details. Or do we have to search out that information ourselves?

Expert:  Sam replied 2 years ago.

You are very welcome

If they refuse your appeal - you then write to them again stating that you

do not accept their decision and wish them to refer to the case to tribunal.

Then they make the referal and it gets listed and you are contacted with a venue and date

And you submit any furtehr evidence you have - HMRC submit their papers (which details the reviews they have made) and you each have acopy of all papers.

Thats it in nutshell ...!

Thanks

Sam

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